Thursday, February 21, 2013

Who is the Competition

Everyone in business maintains some level of vigilence over their competitors. IBM watches HP closely, Deloitte watches PwC, Apple peers over their shoulder at Google. Although I agree in many cases, I often see companies blindsided by a "non-traditional" competitor which begs the question, who really is the competition? I'm not waxing poetic about inner-demons, the crazed lone employee who steals the company secret recipe, the equally crazy genius who takes his unorthodox and ridiculed ideas elsewhere, nor those competitors the analysts and investors have identified for the CEO. There is one very significant competitor few seem to realize ever, even after that competitor has disrupted their business. Perhaps there is an MBA term, but not having an MBA I'll coin my own for this entity: the Hidden Competitor.

Hidden Competitors are not obvious, primarily because they are not trying to hide. Innocently they execute on their business model day in and day out doing whatever it is they do. These companies are off the radar because they don't compete head to head with those companies they are disrupting. What they are doing is changing expectations: of customers, business partners, and possibly even the market. Although there are many examples one of my favorite goes back to a conversation at the Disney Company several years ago.

While providing consulting services at Disney World I asked a Disney executive what he thought about the recently opened Isles of Adventure at Universal Studios. He said he wasn't concerned. I asked him if he felt that way because of Disney's superior product, the head start Disney had on the Disney-MGM Studios, or perhaps the size of the tourism business in Orlando. No. He said he wasn't worried because Universal doesn't elevate a guest's expectations on service. What? He went on to explain he worries about those companies who provide their customers a great customer experience. Why? Those same customers come to Disney World as guests and expect Disney to provide an even better experience, the best in the world. Wow! Who was on his radar? Starbucks, WalMart, and FedEx. I was shocked. When I saw Disney's NexGen concept roll out there was no question in my mind, whether proactive or reactive, there was some company in their rearview mirror they saw coming on quickly preparing to disrupt their business.

Today disruption is a tremendous challenge. Our big industries and big companies do not react well to change that is unplanned. As a result retail, banking, communications, auto, insurance, and just about every other corner of the business world is under threat by Hidden Competitors. Although it doesn't take a wild imagination to see a future with the Mall of Amazon, Bank of WalMart, Google Networking (Kansas City ring a bell?), Apple Car, or PayPal Insurance; the real threat is in reacting quickly enough to the Hidden Competitor who disrupts your business from afar. Who redefines the expectations of your customers, partners, and even employees. Whomever reacts quickest to meet the changed expectations has the opportunity to gain market share, rapidly. Disruption does not happen over night, however it's rarely recognized when it hits the market. At first disruption is dismissed, then recognized for what it is, and finally panic sets in and everything but the kitchen sink hits the wall. Perhaps someday I'll understand why so many companies don't start planning for the disruption at the start. Sure, some ideas will fail. However what is the cost of preparation vs the cost of reaction?

Naturally this challenge aligns with the bigger issue of large companies innovating effectively; not a strong suit. Large companies are struggling to keep apace of the consumerization of technology and gaining a deeper understanding of social media. As they invest their time and effort, I hope they consider the actions of companies in other verticals beyond the cursory glance of what technologies they are using and how. Focus on understanding how they are changing the expectations of those they interact with on a daily basis. Consider how these new expectations will impact your business. And define a course of action to disrupt yourself in anticipation rather than waiting until after you've dismissed it, recognized it, and hit panic mode.

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